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New Jersey Building Laborers' Statewide Benefit Funds v. Demza Masonry LLC

United States District Court, D. New Jersey

December 3, 2019

NEW JERSEY BUILDING LABORERS' STATEWIDE BENEFIT FUNDS AND THE TRUSTEES THEREOF, Plaintiffs,
v.
DEMZA MASONRY LLC, Defendant.

          MEMORANDUM AND ORDER

          PETER G. SHERIDAN, U.S.D.J.

         This matter comes before the Court on a motion for summary judgment filed by Plaintiffs New Jersey Building Laborers' Statewide Pension Fund and the Trustees Thereof (the "Pension Fund") and the New Jersey Building Laborers' Statewide Benefit Funds and Trustees Thereof (the "Funds") (together, "Plaintiffs") (ECF No. 23) and on a cross-motion for summary judgment filed by Defendant Demza Masonry LLC ("Demza") (ECF No. 31). In this action, Plaintiffs seek to hold Demza liable for defunct J. Speranza Brickwork, Inc. d/b/a Speranza Brickwork, Inc.'s ("Speranza Inc.") delinquent contributions to a multiemployer benefit plan and withdrawal liability pursuant to ERISA. Specifically, Plaintiffs assert that the doctrines of alter ego liability, successor liability, and controlled group liability render Demza jointly and severally liable for Speranza Inc.'s ERISA liabilities.

         Background

         Speranza Inc. was a New Jersey-based construction contractor bound to a Collective Bargaining Agreement ("CBA") with the New Jersey Building Construction Laborers' District Council and its Local Unions (the "Union").[1] (Plaintiffs' Statement of Material Facts Not in Dispute ("Plaintiffs' SMFND") ¶ 8, ECF No. 23-3). Under the terms of the CBA, Speranza Inc. was obligated to hire members of the Union to perform certain bargaining unit work covered by the CBA. (Id. IS).

         Under the terms of the CBA, Speranza Inc. was obligated to pay CBA-scale wages and remit fringe benefit contributions to Plaintiffs for work performed by its employees. (Id. ¶ 10). Speranza Inc. paid fringe benefit contributions to Plaintiffs until about 2014. (Id. ¶ 11). On or about August 27, 2014, the United States District Court of the District of New Jersey entered judgment in New Jersey Building Laborers Statewide Benefit Funds and the Trustees Thereof v. Speranza Brickwork, Inc., No.l3-cv-7272, in favor of the Funds and against Speranza Inc. for delinquent contributions for the period of January 1, 2007 through December 31, 2010, in the amount of $4, 901, 819.05. (Id. ¶ 12). On or about May 12, 2015, Speranza Inc. filed for Chapter 7 bankruptcy protection in the United State Bankruptcy Court for the District of New Jersey, in a matter captioned In Re: J. Speranza Brickwork, Inc., No. 15-cv-18907. (Id. ¶ 13). Speranza Inc. was discharged from bankruptcy on or about December 5, 2017. (Id. ¶ 14). Thereafter, Speranza Inc. ceased making contributions to the Pension Fund and therefore permanently effected a "complete withdrawal" from the Pension Fund, within the meaning of ERISA § 4203, 29 U.S.C. § 1383. (Id. ¶ 15). The Pension Fund calculated Speranza Inc.'s withdrawal liability as $7, 778, 286.00. (Id. ¶ 16).

         On or about November 8, 2017, the Pension Fund prepared a payment schedule for Speranza Inc.'s withdrawal liability, as well as a demand for payment in accordance with the payment schedule, and forwarded same to Speranza Inc. and Demza. (Id. ¶ 17). After the first quarterly installment was not received, on or about March 22, 2018, the Pension Fund advised Speranza Inc. and Demza of their failure to remit said quarterly installment and that Speranza Inc. and Demza were in default of their obligation. (Id. ¶ 18). On or about March 22, 2018, the Pension Fund notified Speranza Inc. and Demza that if they did not cure the default within sixty (60) days of receipt of the written notification, Plaintiffs would require the immediate payment of the outstanding liability from the due date of the first payment which was not timely made. (Id.). Speranza Inc. and Demza failed to cure the default, and, as a result, Plaintiffs brought two separate actions, now consolidated before the Court, seeking the outstanding withdrawal liability, as well as unpaid fringe benefit contributions, liquidated damages, interest, and attorneys' fees.[2](Id. ¶¶ 19, 21).

         By way of background, Joe Speranza was the president and sole owner of Speranza Inc., a masonry subcontractor. (Id. ¶ 30). Speranza Inc. operated out of 15 High Street, White House Station, New Jersey 08889 (the "Whitehouse Station Location"), which was then owned by Mr. Speranza's mother and sister. (Id.). Speranza Inc. ceased operations in late 2012 or early 2013 because the company "was no longer making money." (Id. ¶¶ 13, 24, 30; Deposition of Joe Speranza ("Speranza Dep.") at 54:1-3, Certification of Seth Ptasiewicz, Esq. in Support of Motion for Summary Judgment ("Ptasiewicz Cert.," Ex. L, ECF No. 23-2)). A labor union dispute in 2010 also contributed to Speranza Inc.'s financial woes. (Affidavit of Joseph Speranza ¶ 8, Ptasiewicz Cert, Ex. I).

         After being unemployed for several months, Mr. Speranza was advised by a contact in the construction industry of an employment opportunity with a new masonry company. (Id. ¶¶ 13, 14). After successfully following up on that lead, in or around January 2016, Mr. Speranza began working with Tim O'Brien and Willie Dempsey at the new masonry company, which was ultimately named Dempsey, O'Brien, Speranza ("DOS"). (Speranza Dep. at 43:8-14). Despite the name, Mr. Speranza was not offered an ownership interest in DOS. (Id. at 43:17-19). He was employed by DOS as an office manager and estimator. (Id. at 43:24-44:1). DOS, however, completed only one project before the relationship between Mr. O'Brien and Mr. Dempsey soured and the company ceased operations in 2016. (Id. at 44:2-18).

         In or around July 2016, Mr. Dempsey formed Demza and subsequently hired Mr. Speranza as an "estimator/office manager/vice president." (Plaintiffs' SMFND ¶¶ 38, 46, 50). Demza was originally located in Maspeth, New York, but later relocated to the Whitehouse Station Location, where Speranza Inc. formerly operated. (Id. ¶ 47). By the time Demza began operating, however, Mr. Speranza's siblings no longer owned the Whitehouse Station Location as the property was in receivership. (Deposition of Willie Dempsey ("Dempsey Dep.") at 17:15-19-9, Ptasiewicz Cert, Ex. K). Thus, Demza did not rent its operations space from Mr. Speranza's family.

         Mr. Dempsey never offered Mr. Speranza an ownership interest in Demza. (Plaintiffs' SMFND ¶ 39). Rather, Mr. Dempsey has been the sole owner and president of Demza since the company's inception in July 2016. (Id. ¶ 50).

         Mr. Speranza is currently employed by Demza. In Mr. Speranza's role as an "estimator/office manager/vice president for Demza," he handles the bidding of projects, payroll, and signs checks. (Id. ¶ 39). In essence, Mr. Speranza manages Demza's office functions, while Mr. Dempsey is responsible for Demza's operations in the field. (Speranza Dep. at 14:18-20). Demza has employed several other former Speranza, Inc. employees throughout the years, in addition to Mr. Speranza. (Plaintiffs' SMFND ¶¶ 71-75).

         Demza has never worked on any of the same projects as Speranza Inc. or DOS. (Speranza Dep. at 54:11-19). However, the record provided is unclear as to whether Speranza Inc. and Demza shared the same body of customers.

         There are other facts that are not fully explained including, among other things: (1) how Speranza Inc.'s overall management compares to Demza's (e.g., putting aside Mr. Speranza's purported management functions in both companies); (2) how Speranza Inc.'s operations compare to Demza's (e.g., putting aside the fact that they both operate (or operated) as masonry contractors); and (3) how Speranza Inc.'s supervision compares to Demza's, particularly in view of the fact that Plaintiffs seem to allege that Mr. Speranza only had one direct report at Demza, Tony Triola (Plaintiffs' SMFND ¶ 62). Additionally, there are no proofs submitted that Mr. Speranza received extraordinary salary or bonuses which may indicate who is the actual owner of the business.

         In support of its cross-motion, Demza submits that the National Labor Relations Board ("NLRB") has previously investigated whether it was an alter ego of Speranza, Inc. and found that it was not. In that case, Local 4, Bricklayers and Allied Craftworkers' Administrative District Council of New Jersey (the "trade union") filed a charge with the NLRB against Speranza Inc. and Demza alleging that the companies failed and refused to provide the trade union with "necessary and relevant information." (Demza's Moving Br., Ex A at 1, ECF No. 31-3). By letter dated September 27, 2018, the NLRB dismissed the charge finding that there was insufficient evidence adduced to support the trade union's theory that an alter ego relationship exists between Speranza Inc and Demza. (Id.). In particular, the NLRB's Regional Office concluded:

Although Demza also commenced its operations at Speranza's former location in 2017, the investigation did not reveal that Joe Speranza, [Speranza Inc.'s] former sole owner, has had an ownership interest in Demza. Moreover, although Joe Speranza is employed as Demza's Vice President and Estimator, there is no evidence that he has any control over Demza. Additionally, the investigation failed to reveal sufficient evidence that the two entities share common equipment, management/supervision or customers. To that end, Speranza's equipment was liquidated during its 2015 Bankruptcy proceedings and no evidence was revealed that Demza purchased any of Speranza's equipment. With respect to common management and supervision, the investigation revealed that out of 11 Speranza superintendents/foreman, only 3 are employed by Demza in the same or similar capacity. Additionally, out of approximately 13 Speranza's customers, Demza has done business with only one. Finally, there is no evidence that Demza was created to evade its responsibilities under the [National Labor Relations] Act. Given these circumstances, the lack of common ownership, control, equipment, and insufficient evidence of common management, supervision and common customers precludes a finding that an alter ego relationship exists between Speranza and Demza.

(Id. at 2). On November 20, 2018, the NLRB's General Counsel affirmed its Regional Office's decision on appeal. (Demza Moving Br., Ex. B).

         Legal Standard

         Summary judgment is appropriate under Federal Rule of Civil Procedure 56(c) when the moving party demonstrates that there is no genuine issue of material fact and the evidence establishes the moving party's entitlement to judgment as a matter of law. Celotex Corp. v. Catrett,477 U.S. 317, 322-23 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for the non-movant, and it is material if, under the substantive law, it would affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party's evidence ...


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